San Antonio Business Journal – by Tricia Lynn Silva

Locally based brokerage business Magi Real Estate Services is carving out some collaborative space in one of its office properties — as a means of serving some of the Alamo City’s smaller tenants.

A special lease on Magi’s inaugural co-working space was signed earlier this week at The Atrium, which is located at 85 N.E. Loop 410 in North Central San Antonio. The 1,000-square-foot space will be occupied by three companies — a total of roughly eight people — according to Erik Darmstetter, founder and CEO of SalesBy5.

The firms will share expenses on the space — as well as pooling their resources together for the benefit of all three businesses.

With this first collaborative office now spoken for, Magi is moving forward with a second such suite — this one spanning 3,100 square feet. The larger space will feature three private offices, a large conference room and a view of the main runway of the San Antonio International Airport.

The idea for the spaces came courtesy of SalesBy5 — a San Antonio-based sales consulting agency that specializes on messaging, branding and marketing.

“That’s our job, to keep them on the cutting edge,” Darmstetter says.

The idea was received positively by Magi Founder Rick Rodriguez. From there, Darmstetter and his firm went about plugging the concept on high-tech social networking community Twitter.

The Atrium is owned by Brass Real Estate Funds, an investment vehicle founded by Rodriguez back in 1996. To date, the real estate investor has used this fund to accumulate a portfolio of more than 2 million square feet of commercial space — valued at some $230 million.

Magi provides the leasing, property management, development and construction services for the Brass Funds assets.

Initially, Rodriguez had explored setting up the new small-tenant spaces in another Brass Fund property — 10010 San Pedro, also in North Central San Antonio. Damstetter points out, however, that the Atrium had several amenities it could bring to the concept — including a cafe. There was also Magi’s “incredible relationship” with the nearby Holiday Inn — which has stepped up to provide transportation to and from the airport for Atrium tenants, as well as special prices on rooms and food.

Status report

According to the second-quarter 2009 issue of the Business Journal’s Commercial Real Estate Journal, The Atrium spans a total of 133,350 square feet, and is presently 87 percent occupied.

A property like The Atrium is reflective of Rodriguez’ investment tactic — to purchase assets that have an upside in terms of rental and occupancy rates.

It’s a strategy that Rodriguez has used several times over — both here and in Longmont, Colo. Through Brass, Rodriguez has a diverse pool of investors at the ready — a mix of private and institutional partners.

And given the state of the office market these days, more assets with upside potential could soon be up for grabs, notes Rodriguez, who continues to be on the lookout for his next opportunistic buy.

While the Alamo City office sector has proven more stable than many other markets, the country’s still anemic economic fundamentals are not making recovery efforts any easier.

According to the latest National Office Outlook by Phoenix-based Marcus & Millichap Research Services, the high cost of new construction — from the land, to labor, to material costs — is effectively discouraging speculative development around much of the country.

The good news: Less spec space will make for a quicker turnaround in the country’s office markets.

The bad news: Heavy office-based employment losses has led to a diminished demand for space — which will continue to negatively impact rental rates.

Meanwhile, a buyer/seller disconnect — as Marcus & Millichap calls it — and financing constraints have resulted in a dramatic slowdown in sales transaction velocity. It’s an ideal scenario for well-capitalized buyers like Brass, Rodriguez says.

“Given the problems being confronted by many of today’s … commercial property owners, we expect the deal flow to increase substantially,” he says.